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Finally a Tax Law Change That Will Make Our Lives Easier. Well, unless you are a stock broker or mutual fund company that is. 1099-B Reporting Expanded

October 12, 2010 3:02 pm / Leave a comment

Mutual fund

Mutual Fund

Stacie says: Good news for taxpayers who receive Forms 1099-B Broker and Barter Exchange Transactions.  Starting in 2011, these forms will include the cost or other basis information of stock and mutual fund shares sold or exchanged during the year.  I can’t tell you how happy this makes me.  Countless hours are spent each year by preparers and taxpayers alike trying to find the basis information on stock sales.  I have to say that this law change falls within one of my more favored.

WASHINGTON —  The Internal Revenue Service today issued final regulations under a law change that will require reporting of basis and other information by stock brokers and mutual fund companies for most stock purchased in 2011 and all stock purchased in 2012 and later years.  The reporting will be to investors and the IRS. This additional reporting will be optional for stock purchased prior to these dates.

“This important reporting change means investors will now receive the information they need to more easily and accurately report their gains and losses,” said IRS Commissioner Doug Shulman. “We will continue to work closely with stakeholder groups to ensure a smooth implementation of the new requirement, which reduces the recordkeeping and paperwork burden for millions of taxpayers.”

These regulations, posted today in the Federal Register, implement a provision in the Energy Improvement and Extension Act of 2008.  Among other things, the regulations describe who is subject to this reporting requirement, which transactions are reportable and what information needs to be reported. Besides providing numerous examples, they also adopt a number of comments and suggestions received since the proposed regulations were issued last December.

Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, long used to report sales prices, will be expanded in 2011 to include the cost or other basis of stock and mutual fund shares sold or exchanged during the year. Stock brokers and mutual fund companies will use this form to make these expanded year-end reports.   The expanded form will also be used to report whether gain or loss realized on these transactions is long-term (held more than one year) or short-term (held one year or less), a key factor affecting the tax treatment of gain or loss. The expanded form, to be first used for calendar-year 2011 sales, must be filed with the IRS and furnished to investors in early 2012.

The IRS today also announced penalty relief for brokers and custodians for reporting certain transfers of stock in 2011.

The relief is described in Notice 2010-67, which was posted today on IRS.gov.

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HR 5297 Small Business Jobs Act of 2010 Outline of Tax Stuff

September 30, 2010 2:09 pm / Leave a comment

U.S. Capital

Image by Biggunben via Flickr

By Stacie Clifford Kitts, CPA

Well loyal readers, I am finally getting around to outlining the tax aspects of the Small Business Jobs Act.   Because I am a visual interactive learner, writing and organizing helps me to retain information. I guess you could say that blogging is like a study technique for me.  Too bad it doesn’t qualify for continuing education credit.  *sigh* oh well.

Fixed asset expensing – Section 179

  • Maximum expense amount $500,000
  • Phase out amount $2 million for years 2010 and 2011

Fixed asset bonus depreciation – Section 168(k)

  • Extended through 2010
  • Percentage of completion method can be taken into account for qualified property

Qualified small business stock – Section 1202

  • Increases the gain exclusion from the sale or exchange of qualified small business stock to 100%
  • Applies to eligible stock acquired after the enactment date and before Jan 1, 2011

Business credits – Section 38

  • Is extended to five years
  • Can be used to offset regular and alternative minimum tax
  • Tax years beginning after 2009

Built in gains – Section 1374

  • Recognition period for computing built in gains tax is the five year period beginning with the first day of the fist tax year for which the corporation was an S Corporation.

Health insurance for self employed individuals

  • (This is a particularly good one) For tax years ending after 2009, self employed individuals can deduct health insurance for themselves, their spouses, dependents and children under 27 against net earnings for self-employment for purposes of calculating their SECA taxes ( SECA is equivalent to a workers FICA tax)

Startup expenses – Section 195

  • Expenses increased to $10,000 for years beginning in 2010 and 2011
  • Limitation on deduction is increased to $60,000
  • Calculated by the lessor of 1) the amount of the startup expense or 2) 10,000, reduced (but not below zero) by the amount by which the startup expenditures exceed $60,000

Reportable and listed transactions – penalty under section 6707A

  • The penalty for failure to disclose a reportable transaction is limited to 75% of the decrease in tax resulting from the transactions.
  • Max penalty for a natural person is $10,000
  • Penalty for a non-natural person is $50,000 (so like a business or trust or such)
  • Listed transactions maximum penalty will be $100,000 for a natural person
  • Listed transactions maximum penalty will be $200,000 for non-natural person\
  • Minimum penalty
    • $5000 Natural person
    • $10,000 Non-natural person

Listed property – Section 280A

  • no longer includes cell phone.
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